Price spillovers and specialization in health care: The case of children's hospitals

Specialty hospitals tend to negotiate higher commercial insurance payments, even for relatively routine procedures with comparable clinical quality across hospital types. How specialty hospitals can maintain such a price premium remains an open question. In this paper, we examine a potential (horizontal) differentiation effect in which patients perceive specialty hospitals as sufficiently distinct from other hospitals, so that specialty hospitals effectively compete in a separate market from general acute care hospitals. We estimate this effect in the context of routine pediatric procedures offered by both specialty children's hospitals as well as general acute care hospitals, and we find strong empirical evidence of a differentiation effect in which specialty children's hospitals appear largely immune to competitive forces from non-children's hospitals.

Association of Children's Hospital Status With Value for Common Surgical Conditions

IMPORTANCE

Although children's hospitals (CH) provide a substantial proportion of highly specialized pediatric care in the United States, the value of CH compared with non-children's hospitals (NCH) for routine surgical procedures is unknown.

OBJECTIVE

To examine the value of CH for routine surgical procedures by assessing clinical outcomes and payment data.

DESIGN, SETTING, AND PARTICIPANTS

This retrospective cohort study examined pediatric patients undergoing 1 of 13 commonly performed surgical procedures between 2010 and 2015 with 90-day follow-up using administrative data from the Health Care Cost Institute. Data analysis was conducted from July 2019 to December 2021.

EXPOSURES

The primary exposure was tier of CH status, defined using self-reported pediatric services, affiliation with pediatric focused programs, and validated based on proportion of pediatric admissions.

MAIN OUTCOMES AND MEASURES

Payments for common surgical procedures from private insurers and overall complication and readmission rates at 30, 60, and 90 days.

RESULTS

There were 368 220 pediatric patients who underwent one of the surgical procedures of interest; 220 899 (60.0%) of the patients were male; 118 977 (32.3%) had their procedure at freestanding CH (CH-A), 75 256 (20.4%) at CH attached to an adult hospital (CH-B), and 173 987 (47.3%) at NCH. The mean (SD) payment for all procedures at CH-A was $6533.56 ($6399.97), $5847.50 ($4947.47) at CH-B, and $5034.25 ($4787.07) at NCH. The mean (SD) overall complication rate was 0.004 (0.06) at CH-A, 0.01 (0.07) at CH-B, and 0.003 (0.06) at NCH. Readmission rates at 30, 60, and 90 days were similar across all hospital types. After adjusting for zip code, year, surgery, surgery setting, and observable patient, hospital, and county characteristics, the estimated payments for inpatient common procedures were 39% higher at CH-A than at NCH. Payments for outpatient common procedures were 34% higher at CH-A than at NCH.

CONCLUSIONS AND RELEVANCE

In this cohort study, children who underwent common surgical procedures had equivalent clinical outcomes at CH and NCH but the procedures were associated with higher payments and, thus, overall lower value care. To ensure delivery of optimal value to patients and payers, more research is needed to evaluate mechanisms to ensure access, decrease costs, and improve value at both CH and NCH.

Hospital Pricing Following Integration with Physician Practices

The past decade has witnessed a new wave of hospital-physician integration, with the fraction of hospitals owning any office-based physician practice increasing from 28% in 2009 to 53% in 2015 nationwide. We offer one of the first hospital-level longitudinal analyses in examining how hospital-physician integration affects hospital prices in the modern healthcare environment. We find a robust 3-5% increase in hospital prices following integration. There is little indication that hospital quality is commensurately higher or that patient mix has changed following integration. Our supplementary analyses point to stronger bargaining leverage and foreclosure of rival hospitals as potential mechanisms for the estimated price effects.

Quality disclosure and the timing of insurers' adjustments: Evidence from medicare advantage

Mandatory quality disclosure often includes a period over which the quality of new entrants is unreported. This provides the opportunity for forward-looking firms to adjust product characteristics in advance of disclosure. Using comprehensive data on Medicare Advantage (MA) from 2007 to 2015, I exploit the design of the MA Star Rating program to examine the presence of forward-looking behavior among insurers. I find that high-quality insurers reduce prices leading up to quality disclosure, while low-quality insurers increase prices in advance of quality disclosure. These dynamics are consistent with firms anticipating a future change in consumer inertia and updating current-period prices accordingly.

Eliminating composite bias in treatment effects estimates: Applications to quality of life assessment

Researchers are often interested in composite measures such as overall ratings, indices of physical or mental health, or health-related quality-of-life (HRQoL) outcomes. Such measures are typically composed of two or more underlying discrete variables. In this paper, I investigate conditions where the estimated treatment effect based solely on the composite outcome is biased under non-random treatment assignment, which I refer to as composite bias. I then compare the magnitude of this bias across a variety of estimators, including ordinary least squares, propensity score estimators, and an alternative two-stage approach that first estimates treatment effects on the underlying outcomes and then combines these effects into an overall effect on the composite outcome of interest. The results highlight the presence of composite bias, identify general conditions under which such bias exists, and offer guidance as to how best to minimize this bias in practice.

Putting the Patient in Patient Reported Outcomes: A Robust Methodology for Health Outcomes Assessment

When analyzing many health-related quality-of-life (HRQoL) outcomes, statistical inference is often based on the summary score formed by combining the individual domains of the HRQoL profile into a single measure. Through a series of Monte Carlo simulations, this paper illustrates that reliance solely on the summary score may lead to biased estimates of incremental effects, and I propose a novel two-stage approach that allows for unbiased estimation of incremental effects. The proposed methodology essentially reverses the order of the analysis, from one of 'aggregate, then estimate' to one of 'estimate, then aggregate'. Compared to relying solely on the summary score, the approach also offers a more patient-centered interpretation of results by estimating regression coefficients and incremental effects in each of the HRQoL domains, while still providing estimated effects in terms of the overall summary score. I provide an application to the estimation of incremental effects of demographic and clinical variables on HRQoL following surgical treatment for adult scoliosis and spinal deformity.

How the neck affects the back: changes in regional cervical sagittal alignment correlate to HRQOL improvement in adult thoracolumbar deformity patients at 2-year follow-up

OBJECT

Regional cervical sagittal alignment (C2–7 sagittal vertical axis [SVA]) has been shown to correlate with health-related quality of life (HRQOL). The study objective was to examine the relationship between cervical and thoracolumbar alignment parameters with HRQOL among patients with operative and nonoperative adult thoracolumbar deformity.

METHODS

This is a multicenter prospective data collection of consecutive patients with adult thoracolumbar spinal deformity. Clinical measures of disability included the Oswestry Disability Index (ODI), Scoliosis Research Society-22 Patient Questionnaire (SRS-22), and 36-Item Short-Form Health Survey (SF-36). Cervical radiographic parameters were correlated with global sagittal parameters within the nonoperative and operative cohorts. A partial correlation analysis was performed controlling for C-7 SVA. The operative group was subanalyzed by the magnitude of global deformity (C-7 SVA ≥ 5 cm vs < 5 cm).

RESULTS

A total of 318 patients were included (186 operative and 132 nonoperative). The mean age was 55.4 ± 14.9 years. Operative patients had significantly worse baseline HRQOL and significantly larger C-7 SVA, pelvic tilt (PT), mismatch between pelvic incidence and lumbar lordosis (PI-LL), and C2-7 SVA. The operative patients with baseline C-7 SVA ≥ 5 cm had significantly larger C2-7 lordosis (CL), C2-7 SVA, C-7 SVA, PI-LL, and PT than patients with a normal C-7 SVA. For all patients, baseline C2-7 SVA and CL significantly correlated with baseline ODI, Physical Component Summary (PCS), SRS Activity domain, and SRS Appearance domain. Baseline C2-7 SVA also correlated with SRS Pain and SRS Total. For the operative patients with baseline C-7 SVA ≥ 5 cm, the 2-year C2-7 SVA significantly correlated with 2-year Mental Component Summary, SRS Mental, SRS Satisfaction, and decreases in ODI. Decreases in C2-7 SVA at 2 years significantly correlated with lower ODI at 2 years. Using partial correlations while controlling for C-7 SVA, the C2-7 SVA correlated significantly with baseline ODI (r = 0.211, p = 0.002), PCS (r = −0.178, p = 0.009), and SRS Activity (r = −0.145, p = 0.034) for the entire cohort. In the subset of operative patients with larger thoracolumbar deformities, the change in C2-7 SVA correlated with change in ODI (r = −0.311, p = 0.03).

CONCLUSIONS

Changes in cervical lordosis correlate to HRQOL improvements in thoracolumbar deformity patients at 2-year follow-up. Regional cervical sagittal parameters such as CL and C2–7 SVA are correlated with clinical measures of regional disability and health status in patients with adult thoracolumbar scoliosis. This effect may be direct or a reciprocal effect of the underlying global deformities on regional cervical alignment. However, the partial correlation analysis, controlling for the magnitude of the thoracolumbar deformity, suggests that there is a direct effect of cervical alignment on health measures. Improvements in regional cervical alignment postoperatively correlated positively with improved HRQOL.

Total hospital costs of surgical treatment for adult spinal deformity: an extended follow-up study

BACKGROUND CONTEXT

Whereas the costs of primary surgery, revisions, and selected complications for adult spinal deformity (ASD) have been individually reported in the literature, the total costs over several years after surgery have not been assessed. The determinants of such costs are also not well understood in the literature.

PURPOSE

This study analyzes the total hospital costs and operating room (OR) costs of ASD surgery through extended follow-up.

STUDY DESIGN/SETTING

Single-center retrospective analysis of consecutive surgical patients.

PATIENT SAMPLE

Four hundred eighty-four consecutive patients undergoing surgical treatment for ASD from January 2005 through January 2011 with minimum three levels fused.

OUTCOME MEASURES

Costs were collected from hospital administrative data on the total hospital costs incurred for the operation and any related readmissions, expressed in 2010 dollars and discounted at 3.5% per year. Detailed data on OR costs, including implants and biologics, were also collected.

METHODS

We performed a series of paired t tests and Wilcoxon signed-rank tests for differences in total hospital costs over different follow-up periods. The goal of these tests was to identify a time period over which average costs plateau and remain relatively constant over time. Generalized linear model regression was used to estimate the effect of patient and surgical factors on hospital inpatient costs, with different models estimated for different follow-up periods. A similar regression analysis was performed separately for OR costs and all other hospital costs.

RESULTS

Patients were predominantly women (n=415 or 86%) with an average age of 48 (18-82) years and an average follow-up of 4.8 (2-8) years. Total hospital costs averaged $120,394, with primary surgery averaging $103,143 and total readmission costs averaging $67,262 per patient with a readmission (n=130 or 27% of all patients). Operating room costs averaged $70,514 per patient, constituting the majority (59%) of total hospital costs. Average total hospital costs across all patients significantly increased (p<.01) after primary surgery, from $111,807 at 1-year follow-up to $126,323 at 4-year follow-up. Regression results also revealed physician preference as the largest determinant of OR costs, accounting for $14,780 of otherwise unexplained OR cost differences across patients, with no significant physician effects on all other non-OR costs (p<.05).

CONCLUSIONS

The incidence of readmissions increased the average cost of ASD surgery by more than 70%, illustrating the financial burden of revisions/reoperations; however, the cost burden resulting from readmissions appeared to taper off within 5 years after surgery. The estimated impact of physician preference on OR costs also highlights the variation in current practice and the opportunity for large cost reductions via a more standardized approach in the use of implants and biologics.

Cost savings from palliative care teams and guidance for a financially viable palliative care program

OBJECTIVES

To quantify the cost savings of palliative care (PC) and identify differences in savings according to team structure, patient diagnosis, and timing of consult.

DATA SOURCES

Hospital administrative records on all inpatient stays at five hospital campuses from January 2009 through June 2012.

STUDY DESIGN

The analysis matched PC patients to non-PC patients (separately by discharge status) using propensity score methods. Weighted generalized linear model regressions of hospital costs were estimated for the matched groups.

DATA COLLECTION

Data were restricted to patients at least 18 years old with inpatient stays of between 7 and 30 days. Variables available included patient demographics, primary and secondary diagnoses, hospital costs incurred for the inpatient stay, and when/if the patient had a PC consult.

PRINCIPAL FINDINGS

We found overall cost savings from PC of $3,426 per patient for those dying in the hospital. No significant cost savings were found for patients discharged alive; however, significant cost savings for patients discharged alive could be achieved for certain diagnoses, PC team structures, or if consults occurred within 10 days of admission.

CONCLUSIONS

Appropriately selected and timed PC consults with physician and RN involvement can help ensure a financially viable PC program via cost savings to the hospital.

Impact of age on the likelihood of reaching a minimum clinically important difference in 374 three-column spinal osteotomies

Object

Spinal osteotomies for adult spinal deformity correction may include resection of all 3 spinal columns (pedicle subtraction osteotomy [PSO] and vertebral column resection [VCR]). The relationship between patient age and health-related quality of life (HRQOL) outcomes for patients undergoing major spinal deformity correction via PSO or VCR has not been well characterized. The goal of this study was to characterize that relationship.

Methods

This study was a retrospective review of 374 patients who had undergone a 3-column osteotomy (299 PSOs and 75 VCRs) and were part of a prospectively collected, multicenter adult spinal deformity database. The consecutively enrolled patients were drawn from 11 sites across the United States. Health-related QOL outcomes, according to the visual analog scale (VAS), Oswestry Disability Index (ODI), 36-Item Short-Form Health Survey (SF-36, physical component score [PCS] and mental component score), and Scoliosis Research Society-22 questionnaire (SRS), were evaluated preoperatively and 1 and 2 years postoperatively. Differences and correlations between patient age and HRQOL outcomes were investigated. Age groupings included young (age ≤ 45 years), middle aged (age 46–64 years), and elderly (age ≥ 65 years).

Results

In patients who had undergone PSO, age significantly correlated (Spearman's correlation coefficient) with the 2-year ODI (ρ = 0.24, p = 0.0450), 2-year SRS function score (ρ = 0.30, p = 0.0123), and 2-year SRS total score (ρ = 0.30, p = 0.0133). Among all patients (PSO+VCR), the preoperative PCS and ODI in the young group were significantly higher and lower, respectively, than those in the elderly. Among the PSO patients, the elderly group had much greater improvement than the young group in the 1- and 2-year PCS, 2-year ODI, and 2-year SRS function and total scores. Among the VCR patients, the young age group had much greater improvement than the elderly in the 1-year SRS pain score, 1-year PCS, 2-year PCS, and 2-year ODI. There was no significant difference among all the age groups as regards the likelihood of reaching a minimum clinically important difference (MCID) within each of the HRQOL outcomes (p > 0.05 for all). Among the PSO patients, the elderly group was significantly more likely than the young to reach an MCID for the 1-year PCS (61% vs 21%, p = 0.0077) and the 2-year PCS (67% vs 17%, p = 0.0054), SRS pain score (57% vs 20%, p = 0.0457), and SRS function score (62% vs 20%, p = 0.0250). Among the VCR patients, the young group was significantly more likely than the elderly patients to reach an MCID for the 1-year (100% vs 20%, p = 0.0036) and 2-year (100% vs 0%, p = 0.0027) PCS scores and 1-year (60% vs 0%, p = 0.0173) and 2-year (70% vs 0%, p = 0.0433) SRS pain scores.

Conclusions

The PSO and VCR are not equivalent surgeries in terms of HRQOL outcomes and patient age. Among patients who underwent PSO, the elderly group started with more preoperative disability than the younger patients but had greater improvements in HRQOL outcomes and was more likely to reach an MCID at 1 and 2 years after treatment. Among those who underwent VCR, all had similar preoperative disabilities, but the younger patients had greater improvements in HRQOL outcomes and were more likely to reach an MCID at 1 and 2 years after treatment.

Analysis of the direct cost of surgery for four diagnostic categories of adult spinal deformity

BACKGROUND CONTEXT

Existing literature on adult spinal deformity (ASD) offers little guidance regarding an evidence-based approach to care. To optimize the value of medical treatment, a thorough understanding of the cost of surgical treatment for ASD is required.

PURPOSE

To evaluate four clinically and radiographically distinct groups of ASD and identify and compare the cost of surgical treatment among the groups.

STUDY DESIGN/SETTING

Multicenter retrospective study of consecutive surgeries for ASD.

PATIENT SAMPLE

Three hundred twenty-five consecutive ASD patients treated between 2008 and 2010.

OUTCOME MEASURES

Cost data were collected from hospital administrative records on the direct costs (DCs) incurred for the episode of surgical care, excluding overhead.

METHODS

Based on preoperative radiographs and history, patients were categorized into one of four diagnostic categories of deformity: primary idiopathic scoliosis (PIS), primary degenerative scoliosis (PDS), primary sagittal plane deformity (PSPD), and revision (R). Analysis of variance and generalized linear model regressions were used to analyze the DCs of surgery and to assess differences in costs across the four diagnostic categories considered.

RESULTS

Significant differences were observed in DC of surgery for different categories of ASD, with surgical treatment for PDS the most expensive followed in decreasing order by PSPD, PIS, and R (p<.01). Results further revealed a significant positive relationship between age and DC (p<.01) and a significant positive relationship between length of stay and DC (p<.01). Among PIS patients, for every incremental increase in levels fused, the expected DC increased by $3,997 (p=.00). Fusion to pelvis also significantly increased the DC of surgery for patients aged 18 to 29 years (p<.01) and 30 to 59 years (p<.01) but not for 60 years or more (p=.86).

CONCLUSIONS

There is an increasing DC of surgery with increasing age, length of hospital stay, length of fusion, and fusions to the pelvis. Revision surgery is the least expensive surgery on average and should therefore not preclude its consideration from a pure cost perspective.

Search costs and Medicare plan choice

There is increasing evidence suggesting that Medicare beneficiaries do not make fully informed decisions when choosing among alternative Medicare health plans. To the extent that deciphering the intricacies of alternative plans consumes time and money; the Medicare health plan market is one in which search costs may play an important role. To account for this, we split beneficiaries into two groups - those who are informed and those who are uninformed. If uninformed, beneficiaries only use a subset of covariates to compute their maximum utilities, and if informed, they use the full set of variables considered. In a Bayesian framework with Markov Chain Monte Carlo (MCMC) methods, we estimate search cost coefficients based on the minimum and maximum statistics of the search cost distribution, incorporating both horizontal differentiation and information heterogeneities across eligibles. Our results suggest that, conditional on being uninformed, older, higher income beneficiaries with lower self-reported health status are more likely to utilize easier access to information.